Credit cards

What happens when you buy something using a credit card?

• You are taking money from your savings account to pay for the item.

• You are getting the item and freeing yourself from full repayment.

• You are taking a temporary loan from a bank, which must be repaid.

• You are investing in a financial organization, from which you may get profits.

What is interest?

• A penalty for making late credit card payments.

• A charge for borrowing money, generally calculated as a percentage of the amount borrowed.

• A reward for making credit card payments on time.

• A written agreement describing the terms of use for a credit card.

What could lead you to end up with unmanageable credit card debt?

• Buying things you cannot afford.

• Carrying a large balance for a long period of time.

• Losing track of purchases and payments.

• All of the above.

How can credit cards be helpful?

• They are convenient, they free you from carrying around large amounts of cash, and using them wisely can help you establish a strong financial track record.

• They can be used to purchase items you cannot afford, give you extra spending money, and enable you to borrow money you don't have to repay.

• They weigh less than cash, are a status symbol, and give you five years to repay any purchases you make with them.

• They are tied into your checking account, can be used for necessities, and if you lose them, you don't have to pay back any money you owe on them.

Which of these credit card APRs offers is the best long-term deal?

• 15% fixed APR

• 2% introductory APR, which goes up to 23% after 6 months

• 10% APR, which goes up 1% every month for 10 months

• 19% fixed APR, with 1 airline mile earned for every dollar you spend

The "balance" on your monthly credit card statement is the total amount you owe to the bank. The only way to avoid interest piling up is to pay off the ENTIRE balance each month, and not to carry any debt over to the next month. If you paid your credit card bill and were left with the remaining balances listed below, which balance would mean you owe the LEAST amount of money?

• $10.00

• $1000.00

• $0.00

• $563.25

When you first charge something to a credit card, you often have a period of time before the bank starts charging you interest. This is called the grace period, and it usually ranges from 10 to 55 days, depending on the credit card. Which of the following is the best strategy for paying your credit card bill?

• Pay off your entire balance the day after the grace period ends.

• Pay half of your balance during the grace period and half after.

• Pay your entire balance during the grace period.

• Don't charge anything during the grace period.

What is the best strategy for dealing with minimum payments?

• Pay exactly the minimum payment.

• Pay at least the minimum payment and more whenever possible.

• Pay less than the minimum payment whenever possible.

• Never pay the minimum payment.

Which of these credit limits is most reasonable for a student just starting to use a credit card?

• $100

• $1,000

• $10,000

• $50,000

Which of the following is a good credit card practice?

• Always pay off your credit card balance in full, by the monthly due date.

• Treat your credit card like its a debit card that is linked to your bank account and don't spend more than you can afford to pay off.

• Both of these.

• Neither of these.